This document was prepared in early 1996 to outline the case for raising the
minimum wage. It outlines who earns the minimum wage and answers questions
about the likely impact of raising the minimum.

NOTE: The full report is also available in
PDF format. In order to view PDF documents you must
have a PDF viewer ( (e.g.,
Amber or Acrobat Reader)
available on your workstation.

Fact Sheet

Americans know a raise in the minimum wage is one way to help make work pay.
For many working Americans an increase in the minimum wage will make the
difference between living in poverty and not. Furthermore, a higher minimum
wage -- a floor to ensure workers that they're getting a fair deal for their
efforts -- provides a foothold into the middle class for many other families.

The Problem: The Minimum Wage is Worth Less Than It Used to Be

The Federal minimum wage is currently $4.25 per hour. Adjusted for
inflation, the value of the minimum wage has fallen by nearly 50 cents since it
was last increased in 1991, and is now 29% lower than it was in 1979. If left
unchanged, its real value will be at a forty-year low by January 1997.

Raising the minimum wage is one way to make work pay. A recent study
concluded that the decline in the real value of the minimum wage since 1979
accounts for 20% of the rise in wage inequality for men, and 30% for women (see
DiNardo, Lemieux & Fortin). According to the Bureau of Labor Statistics,
3.66 million workers paid by the hour earn at or below the minimum wage. An
increase in this living wage is a strong response to the stagnant incomes that
many of these workers face.

Many Adults Rely on the Minimum Wage as a Living Wage

Contrary to popular opinion, the average worker affected by an increase in
the minimum wage is not just a teenager flipping hamburgers. Only one in
fourteen is a teenage student from a family with above average earnings.

The fact is, almost two-thirds of minimum wage workers are adults, and four
in ten are the sole bread winner of their family.

Increasing the Minimum Wage Lifts Families out of Poverty

Twenty percent of those living on the minimum wage the last time it was
raised in 1991 were in poverty, and an additional 13% were near poverty. In
1993, the President expanded the Earned Income Tax Credit (EITC), which raised
income for 15 million families, helping many working families move above the
poverty line. Yet to complete the goal of insuring that full-time working
families are out of poverty, we need to raise the minimum wage. Recent analysis
by the Economic Policy Institute and preliminary work by the Department of
Health and Human Services suggests that 300,000 people would be lifted out of
poverty if the minimum wage was raised to $5.15 per hour. This figure includes
100,000 children who are currently living in poverty.

The current poverty line for a family of 4 is $15,600. A family of 4 with
one worker earning $4.25 an hour and working full-time year round ($8,500) would
receive a tax credit of $3,400 under the 1996 provisions of the EITC, will
collect food stamps worth $3,5l6, and will pay $650 in payroll taxes. This
family would end up $834 below the poverty line. On the other hand, for a
family of 4 with one worker earning $l0,300 (a full-time year round worker at
$5.l5 per hour), the EITC would provide the maximum tax credit ($3,560), food
stamps would provide $2,876, and they would pay $788 in payroll taxes. The
increase in the minimum wage -- along with EITC and food stamps -- would lift
this family out of poverty.

What a Moderate Increase in the Minimum Wage Would Mean for Workers

The President's proposal to raise the minimum wage by $.90 would generate
$1800 in potential income for minimum wage workers.

Based on expenditure patterns of an average family, $1800 would buy:

Seven months of groceries

One year of health care costs, including insurance premiums, prescription
drugs, and out- of-pocket costs

Nine months' worth of utility bills

More than a full-year's tuition at a 2-year college

Basic housing costs for almost 4 months

Many Working Women Depend upon the Minimum Wage

Fifty nine percent of workers earning from $4.25 to $5.14 per hour are
women; of those, 72 percent are adults 20 years old or over. The President's
proposal to increase the minimum wage would raise wages of more than 5.7 million
working women. This includes more than 950,000 African-American women and
760,000 women of Hispanic origin. Single heads of households, who are often
women, represent over one-fifth of all families who currently rely on the
earnings of a worker making $4.25 to $5.14 per hour.

A Moderate Increase in the Minimum Wage Does Not Cost Jobs

The standard criticism of the minimum wage is that it raises employers'
costs and reduces employment opportunities for teenagers and disadvantaged
workers. However, several studies have found that the last two increases in the
minimum wage had an insignificant effect on employment. Furthermore, an
extension of the time-series studies that had previously been used to claim that
raising the minimum wage decreases employment, no longer finds a significant
impact.

In a recent review of the literature, Professor Richard Freeman of Harvard,
a widely respected labor economist, wrote: "At the level of the minimum
wage in the late 1980s, moderate legislated increases did not reduce employment
and were, if anything, associated with higher employment in some locales."

In discussing the minimum wage, Robert M. Solow, a Nobel laureate in
economics at the Massachusetts Institute of Technology, recently told the New
York Times, "The main thing about (minimum wage) research is that the
evidence of job loss is weak. And the fact that the evidence is weak suggests
that the impact on jobs is small."

Americans Want an Increase in the Minimum Wage

The American public supports increasing the minimum wage by a solid margin.
Nearly every survey finds overwhelming support for raising the minimum wage.
For example, a national poll conducted in January 1995 for the Los Angeles Times
found that 72% of Americans backed an increase in the wage, confirming a
December 1994 Wall Street Journal/NBC News survey that found raising the minimum
wage is favored by 75%.

Despite expected criticism in some corners, the minimum wage has
traditionally had bipartisan support. In 1989, the minimum wage increase passed
the House by a vote of 382 to 37 (with 135 Republicans voting for the bill), and
89 to 8 in the Senate (with the support of 36 Republicans).

Currently, ten states and the District of Columbia have minimum wages that
exceed the Federal minimum wage (Alaska, Connecticut, Hawaii, Iowa,
Massachusetts, New Jersey, Oregon, Rhode Island, Vermont and Washington).
Delaware is expected to pass legislation that will raise its minimum wage on
April 15, 1996. Hawaii's minimum wage is $5.25 an hour and Massachusetts will
match this in January 1997; New Jersey's is $5.05.

The Minimum Wage

Myth and Reality

The federal minimum wage now stands at $4.25 per hour. A person who
works full-time all year long at that wage earns only $8500 in a year. The
buying power of the minimum wage is already 29 percent lower than in 1979 -- and
if left unchanged, will be at its lowest point in 40 years by January 1997. To
restore that buying power and to make work pay, the President has challenged
Congress to raise the minimum wage.

But the debate has been muddied by several myths that anti-minimum wage
forces repeat at every opportunity.

Reality: The last time the federal minimum wage was increased, the
average minimum wage worker brought home 51 percent of his or her family's
weekly earnings. (Source: Analysis of Census Bureau's Current Population Survey
by Professors David Card and Alan Krueger)

Myth: Raising the minimum wage hurts the poor by causing job loss.

Reality: Nearly 10 million working Americans would get a pay raise
if the minimum wage is increased to $5.l5 per hour. As Nobel Prize-winning
economist Robert Solow said, "[T]he evidence of job loss is weak. And the
fact that the evidence is weak suggests that the impact on jobs is small."
(Source: New York Times, January 12, 1995)

Myth: The only study showing that raising the minimum wage does not
cost jobs was a study funded by the U.S. Labor Department.

Reality: One major study -- conducted in 1992 and financed by
Princeton University and the University of Wisconsin -- was published by two
Princeton University economists. One of those economists later joined the Labor
Department. (Source: Washington Post, January 11, 1995) Furthermore, a
similar conclusion has been reached by at least ten other independent studies.

Myth: Raising the minimum wage will have a negligible impact on
people's lives.

Reality: A 90-cent per hour increase in the minimum wage means an
additional $l,800 for a minimum wage earner who works full-time, year round --
as much as the average family spends on groceries in more than 7 months.
(Source: Bureau of Labor Statistics)

Myth: Increasing the minimum wage has always been a bitter, partisan
issue that only Democrats have supported.

Reality: In 1989, the last time the minimum wage was increased, the
House of Representatives vote in favor of the proposal was 382 to 37, and the
Senate vote was 89 to 8. Indeed, Senator Dole said at the time, "[T]his is
not an issue where we ought to be standing and holding up anybody's getting a 30
to 40 cents an hour pay increase, at the same time that we're talking about
capital gains. I never thought the Republican Party should stand for squeezing
every last nickel from the minimum wage." (Source: Congressional
Quarterly Almanac 1989)

Making Work Pay

Questions and Answers on Raising the Minimum Wage

With unemployment at its lowest level in years, should we be tinkering
with the minimum wage? Won't an increase in the minimum wage hinder the
creation of new jobs?

The minimum wage is currently valued at 29% lower in real terms than it was
in 1979.

A number of recent studies have found that a moderate rise in the minimum
wage has little, if any, affect on job creation starting at such a low level.
In fact, "The impact of a minimum wage rise on jobs is small," the New
York Times quoted Nobel Laureate Robert Solow as saying. The Times also
reported that economists agree that a minimum wage rise will lift the incomes of
low wage workers.

Isn't the minimum wage poorly targeted to people in poverty? The
Democratic Leadership Council reports that a number of minimum wage workers are
in households with earnings higher than the median worker. Wouldn't a rise in
the minimum wage just help middle class teenagers?

Although some people who earn the minimum wage are teenagers, almost
two-thirds are adults age 20 and older. The average minimum wage worker brings
home about half of his or her family's earnings. Increasing the minimum wage
will help these workers to make up for lost ground due to inflation -- it will
help make work pay.

The minimum wage provides a foothold into the middle class. A family with
two full-time year round workers would earn $20,600 a year with a $5.l5 minimum
wage.

Wouldn't a rise in the minimum wage hurt minorities and the
disadvantaged due to job loss?

As the New York Times reported, most economists agree that raising the
minimum wage increases the incomes of low wage workers, which more than offsets
any effect on jobs. Further, studies of minimum wage increases fail to show
disproportionate impacts for minority youth.

Additionally, public support for a minimum wage increase is strong. A
January 1995 Los Angeles Times poll found that 72% of Americans back an
increase, confirming a December 1994 Wall Street Journal/NBC News poll that
found that 75% of adults favored a rise in the minimum wage.

How many workers are affected by a rise in the minimum wage?

An estimated 10 million hourly paid workers earn between $4.25 and $5.14,
and would directly benefit from the President's proposal to increase the
minimum wage.

How can you contemplate a rise in the minimum wage with a new Congress
intent on getting government off the backs of business?

The minimum wage has historically enjoyed bipartisan support. Sens. Dole
and Kassenbaum, Speaker Gingrich and Rep. Goodling voted for the last minimum
wage increase to $4.25 an hour in 1989.

Governors across the country are fighting against unfunded mandates.
Isn't the minimum wage an unfunded mandate on businesses and states?

The minimum wage is not a new unfunded mandate. In fact, given the erosion
of the value of the minimum wage over the last 15 years it is now much less of a
mandate on businesses and the public sector than it used to be.

What do you say to all the businesses that say they will lose profit and
possibly go bankrupt if the minimum wage is raised? Aren't you just
antagonizing the business community by proposing a minimum wage increase?

Inflation has eroded the minimum wage so much that it is currently at its
second lowest level since the 1950s. The economy has been very strong, but
wages have not grown as much as they need to for the middle class to keep up.

The Clinton Administration has pursued economic policies to put our fiscal
house in order, laying the foundation for the current economic expansion. But
the problem is that low- wage and middle class workers have not shared fully in
this recovery.